By Tina Rosenberg
New York Times
March 14, 2011
A Bloomberg National Poll says that more than 7 in 10 Americans think that Congress can find major savings in the federal budget by slashing foreign aid. It's a new poll, but this is old news.
Americans want to help others, but they're skeptical that foreign aid can do much good.
Americans have always vastly overestimated how much we spend on foreign aid. A 2010 survey asked Americans what percentage of the federal budget went to foreign aid. The median response was 25 percent. When asked what percentage would be appropriate, the answer was 10 percent. Polls going back at least a decade show similar responses. In fact, foreign aid accounts for less than 1 percent of the federal budget
If Americans are asked whether they want to help bring health, water, education and other crucial resources to poor people around the world, they say yes, by overwhelming majorities. But Americans are skeptical that foreign aid accomplishes these things.
The truth is, much of foreign aid works. Hundreds of millions of people around the world are better off because wealthy countries pay to vaccinate children, dig wells, build roads and buy schoolbooks. But some foreign aid is wasted, stolen or spent on projects that don't really help people.
The facts about foreign aid are crucial to drive home to the American public today, as the political debate over the budget has led many Republicans to single out foreign aid as a target for cuts. (Frank James, who writes a blog at NPR, suggests a novel way to spread the word, using Charlie Sheen's Twitter account.)
But let's talk about on-the-ground practical solutions, The Center for Global Development, a Washington think tank led by Nancy Birdsall, has an intriguing idea that might help. It could make some forms of foreign aid more effective, less corrupt and more responsive to what people need. And in doing so, it could capture more public support for something that improves, and often saves, the lives of millions.
The idea is called Cash on Delivery: instead of rich countries paying for all the little pieces that go into a poor country's program, they pay only when something good comes out. Aid would get transferred when there are measurable, provable results.
Today, rich countries pay for what goes into a poor country's program. Why not pay when something good comes out?
Paying for results is nothing new in the world of business, of course. But that's not the way foreign aid has worked. Let's say that the United States and Malawi decided to help Malawi increase the number of children who finish primary school. Here's the current strategy: Aid officials would work with Malawi's government to decide on whether to build more schools, lower school fees or hire more teachers. Washington would put up the money up front. It would be very involved in the program - vetting Malawi's strategy, recommending approved ways of going about it, and perhaps even requiring that technical advice or materials come from the United States. Monitoring would be very close; Malawi would have to do a lot of paperwork to get the money and constantly show it is being spent well along the way.
As for the question of whether the program succeeds, we might find out later how many teachers were hired or schools built - or we might not. But we would not attempt to measure whether our aid actually resulted in more children finishing school - in fact, it would likely be impossible to prove such a link. And if the money was squandered or stolen, the only possible penalty would be a cutoff of future aid.
How would this project work with Cash on Delivery? The United States and Malawi would draw up a five-year contract that specifies a set of payments and what Malawi must do to get them. These would be made public. The contract would set a baseline: perhaps the number of children expected to finish school next year. The year after that, and every year for five years, Malawi would receive $20 for every child who finishes school up to the baseline number - and, as an incentive to do even better, $200 for every child over that number. The results would have to be accurately measured by Malawi - since school records are often spotty, Malawi would administer a standardized test and count the number of students who took it, and make those results public by district or even school. Those numbers would be verified by independent auditors. There could be steep penalties for lying.
By basing aid on performance, cash on delivery could reduce waste and corruption.
Once the contract is signed, Washington would then step back and keep its hands off. No monitoring would happen until the audit. Malawi could ask for technical help if it chose to, but how it chose to reach the goal would be entirely up to Malawi. Would more children stay in school if they had school meals? Schools in every village? Or a water supply closer to their homes so girls didn't have to leave school to fetch water? Malawi could do whatever it thought would solve the problem. If it squandered its efforts in waste or corruption and produced fewer graduates, it would get less money. By definition, then, donor money would not be wasted.
No one is suggesting that Cash on Delivery should replace traditional aid. For one thing, it has yet to be tried - the British Department for International Development is going to be the first. It is working with Ethiopian schools on a program to give payments directly to secondary schools for each extra girl who finishes.
But in certain situations Cash on Delivery might turn out to be a useful alternative to traditional aid. And its advantages may go beyond a more effective use of dollars: it might increase political support for foreign aid.
Paying for results is attractive. People don't have to worry that the money has gone into some government official's pocket, as taxpayers in wealthy countries won't be sending money unless there are results. "This focuses on a few simple outcomes that people can understand," says Birdsall. "You can say to the taxpayer: mortality fell by this amount."
It could also help to create more accountability in poor countries. In most aid-dependent countries, citizens have no idea how much governments are getting in aid and how they spend it. Cash on Delivery sets clear goals and requires that all information be public. The idea might also lead to more sustained progress, as the strategies would be fully devised and implemented by local officials based on what they think would work best. It would also alleviate the sense that a country's problem was fixed by outside intervention; local officials and citizens could claim ownership of the solution.
Experimentation in foreign aid is valuable - and rare. Public bureaucracies are not naturally innovative, and the tendency to stick with the pretty-good is especially strong when people see programs as under siege, a feeling that is fairly constant in the foreign aid business. Because there is such a small political constituency for foreign aid and it is so vulnerable to cuts, many people who work in it feel the best course is not to raise questions about its effectiveness - even if they share those questions themselves.
Cash on Delivery as the Center for Global Development imagines it is yet untried, but other forms of pay-for-results are being used. Perhaps the program closest in spirit is one run by a nonprofit group called the Global Alliance for Vaccines and Immunization (GAVI), which has prevented more than 5 million child deaths by increasing vaccination rates and bringing new vaccines to poor countries. GAVI employs a variety of creative financing mechanisms, including a pay-for-results plan that has been used in 53 of the world's poorest countries. The goal is to increase the number of children who complete the three-dose series of DTP (diphtheria, tetanus and pertussis) immunizations. For every child immunized above the baseline, the government gets $20. The plan lasts at least five years. For the first two years, the government gets a fixed amount of money. The pay-for-performance kicks in during year three.
The program has helped many countries to increase their vaccine coverage. An evaluation by Abt Associates of the program's first five years concluded it had a "significant positive impact."
It is, however, a work in progress. "It worked, but we need to be cautious and not see it as a magic bullet," said Julian Lob-Levyt, who was head of GAVI until recently. "We underestimated the management skills needed."
One problem was that in some countries while the national health ministry understood the requirements and realities of pay-for-performance, this knowledge did not trickle down to the district health departments that had to manage the program. That might be easy to solve - but there were more difficult issues. A paper in the Lancet argued that the temptation to exaggerate success was overwhelming - after all, that's what the money rides on. The authors said that countries did improve their vaccination rates, but not as dramatically as they claimed to. The study shows the need for any pay-for-performance program to do extensive independent auditing to check a country's claims.
